3.2 – Urban Freight Distribution Channels

Authors: Dr. Jean-Paul Rodrigue & Dr. Laetitia Dablanc

a. The Dualism of Urban Freight Distribution

All urban freight distribution systems involve a wide array of supply chains, each of varying importance depending on the urban setting and the level of development, but coming into two main functional classes and associated with specific freight flows; consumer-related and producer related distribution. Two actors, private and common carriers, are handling commercial freight transportation. Private carriers are beneficial cargo owners (manufacturers or retailers) using their own transportation assets (fleet and workforce). They can also subcontract this function to an independent carrier. Common carriers service any customer on a contractual basis, leading to the opportunity to consolidate cargo and deliveries. The share of private carriers is dominant for urban freight distribution in developing countries, while in developed countries, common carriers account for about half of urban deliveries.

The issue of dualism remains prevalent in urban freight distribution as it underlines different modes of operation between distribution systems that are integrated into globally-oriented supply chains and distribution systems linked with informal activities that are more related to the local or regional economy. This is best represented by owner-drivers, or small independent truckers acting as sub-contractors to large carriers for the final distribution of goods in urban areas. Therefore, dualism is illustrative of the co-existence of modern and traditional means of freight distribution within the same metropolitan area. Another aspect of dualism is related to an active informal transportation sector that supplies the needs of lower-income segments of the population, a very important component of city logistics services in developing countries.

b. Consumer-Related Distribution

Consumer-related distribution mainly involves the retail sector and the distribution of goods to the final consumer. They tend to be the main freight attractors.

  • Independent retailing. Urban areas have a notable variety of retailing activities, many of which defining the commercial and social character of neighborhoods. They are often small single owner stores, and in developing countries, these retailing activities are often complemented by informal street markets and stalls. This form of retailing usually relies on a variety of suppliers that tend to rely on their own account delivery vehicles.
  • Chain retailing. In the contemporary commercial landscape, chain retailing (stores directly affiliated to a common brand or franchised from this brand) has become an important element. Like independent retailing, chain retailing covers an extensive array of goods supplied by manufacturers that have extensively relied on global sourcing. Chain retail outlets are located in central areas (and being a defining element of urban centrality) as well as in suburban and peri-urban areas (such as “Big-box” stores). Shopping malls, many quite large, are set on the principle of economies of agglomeration and the provision of ample parking space. Chain retailing tends to rely on the expertise of third-party logistics services providers to mitigate urban freight distribution challenges, but mostly to organize complex multinational sourcing strategies for mass retailers. Large stores are commonly accessed through dedicated delivery bays, where they are resupplied on a daily basis through their own regional warehousing facilities.
  • Food deliveries. Since most food products are perishable, a specialized form of urban distribution has been set to supply outlets such as grocery stores and restaurants. A large grocery store can receive 15 to 30 deliveries per day from different suppliers using specialized delivery facilities. Smaller grocery stores have fewer capabilities, which can result in alternative forms of delivery, such as using the sidewalk. The outdoor market (central markets offer enclosed facilities) also plays an important role in supplying urban populations with perishables, particularly in developing countries. This may be linked with informal forms of distribution where food producers deliver their products to urban markets. Limited information is available about urban food consumption levels, but high levels of spoilage are observed in the range of 50% of all the food consumed. Since food deliveries commonly involve perishable goods, the reliable transport of refrigerated goods (often referred to as cold chain logistics) is an important component in improving this relatively poor performance.
  • Parcel and home deliveries. Globalization and the setting of advanced services such as insurance, finance, or corporate management (head or regional offices) are linked with a growth in the movement of parcels. While some are serviced by local companies, large parcel carriers have established services covering the majority of the world’s leading commercial cities. They maintain a network of strategically located distribution centers where shipments are consolidated or deconsolidated. International shipments are often taken care of by parent companies, namely air freight integrators. However, the main growth in parcel deliveries is associated with e-commerce and its home deliveries for retail goods, including niche markets such as groceries. The emergence of distribution-based consumption (personal consumption contingent upon physical distribution within a set time frame) supported by e-commerce is an important driver of home deliveries. This requires significant logistical capabilities with many large e-commerce retailers owning a network of distribution centers and even delivery vehicles, all of which are supported by information systems for orders, inventory management, and tracking.

c. Producer-Related Distribution

Producer-related distribution mainly involves the manufacturing sector and related activities such as transportation terminals. They are the main generators of freight.

  • Industrial haulage. Cities are zones of production as well as gateways for the circulation of goods. Manufacturing activities thus generate substantial freight movements that tend to be proportional to the material intensity of their production and the synchronicity of their supply chains. For instance, a cement factory will generate heavy trucking flows of aggregates (sand, silicate) while a car assembly plant will generate numerous movements of parts.
  • Terminal haulage. Large transportation terminals such as ports, airports, and railyards are dominant elements of the urban landscape, including logistics zones where freight is distributed to extensive markets. Transport terminals and logistics zones are also generators of goods movements that may impact urban circulation (the last mile). Gate access at large intermodal terminals such as ports can lead to congestion (queuing) and local disruptions.
  • Construction sites. Urban infrastructures, from roads, residences to office, and retail spaces, are constantly been constructed, renovated, repaired, and in some cases destroyed to make room for new developments. Such activities are intensive in material use and must be supplied on an irregular basis both in terms of the time and location of the deliveries. They thus can be very disruptive.
  • Waste collection and disposal. Urban activities generate large quantities of waste, namely paper, paperboard, food, plastics, metals, and glass. These materials must be collected and carried to recycling or disposal sites. In particular, recycling has become an important activity taking place in urban areas and involve specialized vehicles and dedicated pick-up tours. As standards of living are increasing across the world, the amount of waste generated by cities has grown accordingly.